More proof QE is driving asset prices higher
Exactly one year ago today, a Christies art auction torched all previous records to boast the highest dollar sales in a single night. A Francis Bacon piece sold for US$142m, Jeff Koons – surely the most undeserving wealthy person on the planet – sold another piece of pretension for US$58m, a record price for a living artist.
Almost US$700m worth of art sold that night. Among them was a piece by created by Christopher Wool in 1988 known as Apocalypse Now. In polite circles, it is called 'word art'. In less polite circles, it is called...well, something less polite. Apocalypse Now is a 7-foot white background with three sentences written in bold black font. Taken from the movie of the same name, it reads:
Sell the house, sell the car, sell the kids
Described by the dealer peddling it as 'a masterpiece', the piece sold for US$26m. The buyer is rumoured to be a well known finance industry titan.
Over the past 10 years, art sales have risen over 1,000%; they were up 33% last year alone. Art has morphed from an esoteric pastime of the few to a commonly accepted store of wealth. Private equity boss Ron Perleman is said to hold 20% of his wealth in art, worth some US$3bn. There are, of course, many reasons for the boom in art. Diversification, growth in the number of super rich and the spread of narcissism have all played a part. So has, I would argue, central bank policies that have encouraged asset prices higher.
Apocalypse Now was sold in 1989 for $7,500. In 25 years it has shot up 350,000%, surely one of the best investments of all time. Those who shared in its success have two thank yous to make: one to the pretentious world of modern art; another to central banks, whose wanton ways have encouraged the growth of the market.
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